Most unsecured creditors to collapsed fashion retail group Mosaic Brands (ASX: MOZ) have been left in the cold after administrators failed to find buyers for any of the company’s businesses, leaving them with an insurmountable black hole of more than $242 million from total debts of $318 million.

While Mosaic’s staff, who are listed as priority unsecured creditors, are expected to receive their pay, superannuation and leave entitlements totalling $22 million, unsecured creditors comprising trade creditors, suppliers, landlords and customers with gift cards are expected to get a zero return.

Even secured creditors, which are owed $54 million, are unlikely to get a full payout for the debts they are owed by the company.

“The receivers and managers have advised us that while they expect there will be enough money from the sale of the Mosaic Group’s assets to pay priority unsecured creditors in full, unfortunately, they do not expect there will be sufficient monies to pay the secured creditors in full,” say the administrators, adding that any shortfall will spill over into the unsecured creditor pool.

The update to creditors today follows an announcement by administrators last month that they will close down Mosaic Brands’ two remaining businesses Millers and Noni B and their combined 252 stores by mid-April after failing to find buyers for the fashion retail brands.

It’s been a slow death for Mosaic Brands which operated nine brands and 700 stores across Australia and New Zealand prior to appointing administrators from FTI Consulting in October last year. This was followed by the appointment of receivers and managers from KPMG who currently control the business.

Prior to the voluntary administration, the company announced the closure of its Rockmans and W.Lane chains. Administrators added to the toll by announcing a series of brand closures after hitting roadblocks in their attempt to sell each of the company's businesses, including Katies, Millers, Rivers and Noni B.

In the update to creditors and employees, Mosaic Brands’ administrators have advised that the receivers are “cautiously optimistic” that the $22 million owed to Mosaic Group’s former and current employees will be paid in full, although the timing of payment is currently unknown.

Secured creditors consist of a senior lender owed about $36 million and the holders of secured convertible loan notes totalling $18 million.

However, despite estimating unsecured creditors are owed about $242 million, the receivers say this doesn’t include contingent claims from landlords for breach of leases and any residual gift cards.

“This means there will not be any money to pay debts owed to unsecured creditors (which includes suppliers and landlords) for goods and services supplied before 28 October 2024 (being the date of appointment of receivers and managers and administrators),” says the receivers report.

“The only possibility of funds becoming available to pay unsecured creditors is if either the Mosaic Group is placed into liquidation and the liquidator is successful in recovering money from potential legal actions (or) if someone proposes a deed of company arrangement and agrees to pay money into a fund that would pay a portion of the amounts owed to suppliers and unsecured creditors.”

However, no such proposal has been received to date.

The administrators report reveals that despite initially receiving “good interest” for the Mosaic Brands businesses, potential buyers raised several concerns including the future strategy of the brands and “significant concerns” over the group’s historical indebtedness and the impact of the insolvency on the business.

The buyers were also concerned by a “lack of committed orders for future stock, which were not able to be placed due to the circumstances of the appointments, and the lead times required for ordering”.

“The result of these concerns meant that parties either withdrew from the sale process or made offers that were lower than the realisations estimated by the receivers and managers trading the business and realising inventory and other assets outside of a business sale.”

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